Area Outlook Rosy As Jobs Increase, Construction Booms

If Washington-area economists and business leaders were asked to write a song about the local economy, they might end up with a variation on the theme of "Everything's Coming Up Roses."

Indeed, the outlook is rosy for the balance of 1985 and early 1986, as substantial employment gains, lower interest rates and explosive growth in commercial construction continue to fuel the economy in the Washington Standard Metropolitan Statistical Area (SMSA), the Census Bureau's label for the greater Washington area.

"Basically, it looks as though 1985 will be a good year again in terms of employment," observed Richard F. Groner, director of labor market information for the D.C. Department of Employment Services (DCDES). "The regional picture looks very good even though there are still some structural unemployment problems in the city."

The DCDES compiles labor market information for the District and the Maryland and Virginia suburbs, which constitute the Washington SMSA.

Employment in the region grew at a rate of 4.6 percent from July 1984 to July 1985 compared with a 5 percent rate in the prior 12-month period, according to Groner. Even though the most recent year-to-year figure is slightly lower, it is substantially higher than the national rate, which was only 1.9 percent between August 1984 and August 1985.

Meanwhile, Washington's suburbs continue to enjoy almost full employment, a condition that is expected to continue through the end of the year, at least. The DCDES is projecting a year-end unemployment rate of only 4.2 percent for the Washington SMSA.

"Obviously, the main issue is what happens to the national economy," Groner said. "A national downturn always leads to a downturn in the local economy, but it would take a major change in the national economy to have an impact here. I don't think anybody is predicting any radical downturn in the national economy by the end of the year."

Meanwhile, the federal sector continues to be a critical factor in the relative strength of the local economy, even though employment in that sector has declined in recent years. A scheduled pay increase for federal workers in October could add zest to the region's economy in the final quarter. "Usually, when there's a federal pay raise, you get an influx of spending," Groner observed. Retail Job Growth Strong

Another factor that could spark further expansion in the economy in the fall is the level of employment in the retail trade area.

In each of the five fall seasons prior to 1984, area retailers added about 13,000 jobs to the employment rolls. Last year, however, there was a net gain of 17,000 in the retail sector.

"We're looking for the same kind of expansion," Groner said.

A more reliable indicator of growth in the region's economy during the next six months, according to several experts, is commercial construction activity, which has accelerated since the first of the year.

The Council of Governments reported that second-quarter commercial construction in metropolitan Washington was up 2.8 million square feet over first-quarter totals. A recent COG report shows that construction either began or contracts were awarded for 133 commercial projects worth $867 million in the second quarter, accounting for 7.4 million square feet of space in the pipeline.

Evidence of the construction boom is visible all around the Capital Beltway, from Ballston to Bethesda, from Tysons Corner to Greenbelt and from Downtown East to the West End.

The explosive building pace not only assures steady employment in commercial construction and related activities during the next year, but is a strong indication that a substantial amount of money will be pumped into the economy by local businesses expanding and by outside companies relocating all or part of their operations to the area. The building boom will have a multiplier effect for the economy as it stimulates consumer spending and residential construction, government and business officials say.

The biggest impetus behind commercial construction in the area is the increasing demand for space by defense contractors and high-technology and telecommunications firms, according to several leasing specialists. A bigger demand for office space is also apparent in the decisions by major corporations to establish offices in Washington, where representatives can deal more directly with government officials.

"By and large, I'm optimistic about the close of this year and early next year," said James Eichberg, president of Smithy Braedon, a Washington real estate leasing and management firm. "I've never seen our agents as busy" as in the last six months.

Eichberg acknowledged, nevertheless, that there is "some overbuilding" and that owners of newer office buildings will continue to make concessions on lease rates to prospective tenants so long as space is plentiful. But he added, "The concession package is not as generous as it was a year ago. Instead of giving away the store, the market's tightening up."